The bank will easily get a mortgage approved for a borrower with a million-dollar income, rich guarantors and two apartments in the property. But it is much more difficult for a simple average person, families with children, people with a “gray” salary. Sometimes you have to fight to prove to the bank that you can pay and will not disappear anywhere.
How does a bank make a decision on issuing a mortgage?
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Before issuing a loan, the bank will check that you are a reliable borrower. I don’t know how he decides this – each bank has its own criteria, which it doesn’t tell anyone about. Credit managers should not be told about them under threat of dismissal – this is a trade secret. But if in general terms, then before the application is approved, you will go through 3 stages.
How to get your mortgage approved
Scoring or assessment of credit risks. In order not to require the entire set of documents from you at once and not to waste time on unwanted clients, banks first make preliminary decisions.
In the office or on the bank’s website, you fill out a questionnaire with basic information: passport data, income, length of service, place of work. The questionnaire data is processed by a special credit program that assesses credit risks (scoring) by dozens of parameters. The scoring system analyzes your data (age, profession, income, seniority, property, etc.) and calculates whether you can pay the loan. The program automatically screens out clients who do not meet the bank’s requirements or have an increased credit risk.
What is real estate financing consulting? It is worth it?
It is easier for a bank to refuse than to issue a risky loan
The scoring program makes a decision automatically based on statistical data. She can refuse you a mortgage, even if you personally have no claims as a borrower.
Let’s say Irina works as a middle manager in a construction company, she has several loans repaid on time and a sufficient salary. But according to the bank’s statistics, in the last year middle managers of construction companies have become more likely to miss payments. Based on this, the system considers Irina a risky borrower and may refuse her.
Interview with a manager. Filling out an application and submitting documents to a loan officer is not a simple formality. He evaluates you as a person: pays attention to appearance, speech, demeanor. If something alerts him (for example, you come untidy, in torn shoes or drunk), he will mark “suspicious” in the questionnaire and you will be checked more carefully.
Be careful when filling out an application online on the bank’s website. The program will see if you correct the numbers several times and decide that you are trying to deceive it.
Security check. The security service will check the authenticity of the documents and the specified information:
- work and income : whether the employer indicated in the certificate is registered, whether the address matches, whether the liquidation procedure is underway, whether the company has debts. To confirm the income, the Security Service will call the personnel department or the accounting department, if in doubt, make a request to the pension fund;
- credit history at the credit bureau;
- reputation : the presence of a criminal record, publications in the press and even social networks.
After the verification is completed, the Security Service will transfer the documents and the results of the analyzes to the bank’s credit committee, which will make the final decision on issuing a mortgage.
Usually the bank makes a decision in 3-4 days, in rare cases – in a week or two. Once approved, you will have 1 to 4 months to find an apartment.
What does the bank require from the borrower?
The documents:
- the passport;
- driver’s license;
- military ID for men;
- certificates confirming income: 2-NDFL, a certificate in the form of a bank, certificates of monthly receipt of pensions or benefits, for entrepreneurs – tax returns, for additional income – 3-NDFL, lease agreement, etc .;
- SNILS;
- TIN;
- Marriage certificate;
- Birth certificates of children;
- A copy of the work book certified by the employer;
- Documents for property: extract from the USRN, contract of sale;
- Bank statements showing the amount of money in the accounts.
The initial payment is 20-50% of the cost of the apartment. The more, from the point of view of the bank, you are a reliable borrower, the smaller the amount of the down payment.
Life and health insurance is a mandatory requirement by law.
Who definitely won’t get a mortgage
No matter how hard you and I try, not everyone will get a mortgage. No bank will approve a loan:
- people under 20 or over 65 ;
- borrowers without income : bank account statements, statement of movements of funds on the card, monthly payments of hundreds of thousands of rubles will not convince the bank if you cannot provide official documents confirming income;
- debtors for other loans, utilities, alimony, fines;
Check debts
Before applying, check the debts. You could forget to pay a fine or owe a few kopecks to public utilities. Even if you are sure that you do not have outstanding loans and delinquencies with banks, order a report on your credit history from the Credit Bureau. Often it contains irrelevant information: for example, loans that you have already repaid are still listed as valid. If you find errors, correct them by contacting the bank.
How can a mortgage broker help you?
Most of my clients only find out about mortgage broker after being turned down by banks a few times. Goo can help not only borrowers with problems, but also the most ideal ones.
A good mortgage broker will help any borrower get approval faster and on more favorable terms than if you apply to the bank yourself
It will help you if:
- do not know where to start or get confused with the documents;
- can’t verify income
- not enough money for a down payment;
- have already applied to the bank and received a refusal;
- you are a citizen of another country.
The main thing that It do is to select the optimal loan program in one of the partner banks. Banks are loyal to our customers: they know that we have already checked them, studied the history and suggested how to fix problems.
Ideal Borrower
A mortgage for a bank is not only a long-term income, but also a big risk. If you cannot pay, it will be difficult for the bank to get your money back. That is why banks are so demanding.
The amount of income is the main criterion for the bank
Portrait of an ideal borrower:
- citizenship;
- age from 21 to 45 years (formally, it is possible up to 60-65, but in practice, people over 45 are less likely to approve a loan);
- with a working other half and without children;
- official all-white work;
- high and stable income;
- monthly payment is 20-30% of the salary, but not more than 50%;
- at least a year of work experience, rarely changed jobs, has been working for the same employer for at least six months.
Why you might be denied
If something does not suit the scoring system or the Security Service, you will be refused without explanation. The requirements of different banks for borrowers may differ in numbers and details, but converge in the main points. Most often, even credit managers do not know the reason for the refusal. I’ll tell you about the main reasons for the refusal.
Non-compliance with the requirements that the bank imposes on the borrower. Most often this is a small income, insufficient experience or inappropriate age.
Bad credit history. The bank may alert even a few missed payments on a credit card. If you have had more serious problems with payments or it has come to collectors, you will not be able to get a loan until you fix your credit history.
Most often, a delay of up to 30 days is considered technical and does not affect the credit history. But if this is repeated regularly, the bank understands that you are not very obligatory. But if you had delays for more than 3 months, this is a big reason for the bank to refuse you.
A few years ago, Svetlana took a loan for a vacation and miscalculated: she missed payments, delayed payments several times. As a result, she paid off the loan, but ruined her credit history. During this time, Svetlana’s income has doubled, she has no debts, but the bank does not want to give her a mortgage because of past problems.
But with Eugene, the situation is different. He never had delays, a good salary and in everything he is an ideal client. But the bank approved his application only the second time, because he never had loans. If you don’t have a credit history, the bank can’t check how good a payer you are and doesn’t want to be the first to give you a loan.
High credit burden. The monthly payment on the loan should not exceed 40-50% of the confirmed income. If someone in the family does not work or has children, this ratio can be reduced. At the same time, the bank takes into account all the credit obligations of the borrower, even credit cards.
Debts on taxes and fines. A common case is people forget to pay taxes or traffic police fines.
Providing false information and forged documents. If the bank catches you cheating, they will refuse you.
Never deceive the bank and do not forge documents
Errors (typos) in supporting documents. Your accounting department could have made a mistake in several figures, and the bank checked the income through the Pension Fund, noticed a discrepancy and refused. To prevent this from happening, carefully check all documents before submitting.
Incomplete set of documents. Another common problem is that people simply forget to submit all the documents.
The bank was unable to contact the employer. If this happens more than once, your application will be rejected.
The opinion of the employee who accepted the application. If you made a bad impression on an employee, he can make a note about this in the questionnaire. If the bank doubts you, it will take into account the opinion of the employee and refuse you a loan.
Criminal record. If you have a criminal record, most banks will turn you down right away.
Recent rejection. If the bank once refused you, the next time it will consider the application no earlier than a certain period.
What not to do
Fake income statements. The Internet is full of offers to fake a 2-personal income tax certificate for several thousand rubles. This may help to buy a washer on credit, but will not deceive the bank in the case of a mortgage.
Before approving the application, the bank will contact the employer indicated in the certificate: it will check you through the personnel department, and clarify the amount of income in the accounting department. If the certificate turns out to be fake, at best, you will be denied a mortgage, at worst, they will be blacklisted, after which no bank will want to contact you.
Sometimes applicants bring genuine certificates from a real job, but with an exaggerated income.
Boris has been working as a manager for 5 years and earns an average of 60,000 ₽ per month. But he was afraid that his income would seem small to the bank and asked the authorities to write him 90,000 ₽ in the certificate. The bank doubted that a simple manager earns that much, requested an extract from the pension fund and saw inconsistencies. As a result, Boris was refused without the right to reapply, and now he cannot get a mortgage in other banks either. And if he didn’t forge the certificate, but turned to a mortgage broker or bank manager, he could easily find a way out: increase the down payment, extend the mortgage term to reduce the payment, find a guarantor or negotiate with the employer to raise wages.
Sign certificates to yourself. This trick is often used by entrepreneurs who work as directors in their own companies.
Do not sign certificates for yourself or family members
Nikolai works as a director in his own company. The bank will not accept a certificate of income signed by itself. Natalia works as a director in her husband’s restaurant. The certificate signed by her will also not suit the bank. In such cases, an outsider must certify the document: the chief accountant of the organization, the executive director or the head of the personnel department.
How to improve chances of getting your mortgage approved
Talk about informal surcharges. Banks are well aware that many of their clients earn not only officially. If your “gray” surcharges are significant and regular, honestly tell the bank about them. Then he will ask you to bring you a certificate in the form of a bank, which will clarify your full income with the employer.
A bank statement is confidential information. The bank can only use it as proof of your income
The bank will not transfer this data to the tax office and will not cause problems for your employer. Its purpose is to understand whether you can pay the loan or not, and not complain to the Federal Tax Service. If the informal income is sufficient, the bank will approve the mortgage.
Confirm informal income. There is another case – when even official income is difficult to confirm. For example, for tutors, hourly specialists, waiters.
Roman works as a waiter and earns ₽70,000 a month with tips. But in the 2-NDFL certificate, his income is 20,000 ₽. If Roman has a good credit history, deposits or property for collateral, the bank can approve the loan. Roman will only need to provide the bank with a certificate from the employer about the real monthly income.
In our case, the employer refused to certify the official document, and I came to Roman’s aid. I provided the bank with verbal confirmation of the client’s income and that was enough for the mortgage to be approved.
Open an individual entrepreneur if you can’t confirm income in any way. If you work unofficially, the bank will refuse. Even with a good income, a large turnover on the card and millions of accounts. For him, the risk that you will lose your job is too high.
Opening an individual entrepreneur and working legally is the best option for people who cannot prove their income in any way. For example, freelancers, tutors, repairmen.
If you have an individual entrepreneur, after a year or two of work in plus, without debts on taxes and insurance premiums, the bank will be able to issue you a mortgage. Most likely, the bank will require an initial payment of 40% of the cost of the apartment.
Provide a good credit history. If the credit history is damaged, it is impossible to correct it (that is, delete negative information). But you can prove to the bank that you have corrected yourself. For example, pay your existing loans on time.
Often clients take small loans (up to microloans) and repay them on time so that banks can see that they are responsible payers.
Close existing loans. Total loan commitments must not exceed 50% of your client. Ideally, no more than 20-30%. To be on the safe side, close all loans and credit cards you don’t use before applying.
Be a reliable entrepreneur. Banks do not like entrepreneurs as mortgage borrowers. Some even refuse to accept applications from them. Even if an entrepreneur earns much more than the average employee with three children and credit cards, he is a risky borrower for the bank – it is believed that the business can bring unstable income. It’s weird, but that’s how it works in practice.
In order for an individual entrepreneur to approve a mortgage , it must meet the requirements of banks:
- work for at least one and a half years : it is believed that during this period it becomes clear whether the business is profitable or not;
- earn consistently all year round : better 100,000 every month than a million times a year before the New Year;
- transparent reporting and a full set of documents : the bank must see your tax and pension contributions, the compliance of the tax regime with real activities, the absence of dubious transactions. Provide the bank with registration documents and declarations for several reporting periods. If the management reporting data and those that you initially reported when applying do not match, the bank will add interest or refuse the loan.
What to do if the bank refused to get your mortgage approved
Apply to another bank . Banks have different requirements for borrowers – if you are denied one, you may be welcome in another. Therefore, carefully consider the offers of other banks and contact one of them. Often smaller banks have less stringent requirements for borrowers.
If several banks have refused, think about the reasons for the refusal and solve them.
Save more money for a down payment. Even an extra few hundred thousand rubles (especially accumulated in a short time) can convince the bank that you are a reliable borrower.
Correct your credit history: correct erroneous data, take a small loan and pay it off on time.
Often my clients are sure that they have an excellent credit history, and in reality it turns out otherwise.
Pay off tax debts, fines, obligations.
Find co-borrowers and guarantors. This is the best option if income is not enough. Family members can become co-borrowers: spouses or parents, and guarantors can be any people or legal entities.
Get a consumer loan instead of a mortgage. This is an extreme way if several banks have already refused you a mortgage and there are no more hopes for a mortgage. A consumer loan is easier to get, and several loans can be enough for an entire apartment. The main disadvantage is that the percentage is much higher, and the payment period is much shorter.
Apply for a mortgage for relatives if their income is higher and they meet the requirements of the bank.
Contact a mortgage broker. If you can’t get a mortgage on your own, contact a professional mortgage broker. A competent specialist can help even the most hopeless client.
Remember
- In order for the bank to get your mortgage approved, make sure that you meet the requirements for borrowers, collect a complete package of documents and check your credit history.
- A suitable age, sufficient official income and experience are the main conditions for mortgage approval.
- If the bank refused a mortgage, contact another bank, fix the problems, attract guarantors, arrange a loan for a relative, or contact a mortgage broker.
- A mortgage broker will help not only problem borrowers, but also ideal ones. I help you get approval faster and on more favorable terms than when you apply to the bank yourself.
